Options available for air travel by business travelers are limited to commercial airlines, aircraft ownership, and chartering. Ideally, frequent business travelers seek comfort as well as an environment in which in-flight productivity is enhanced. Coach class traveling on commercial airlines provides a largely unfavorable environment. However, in exchange for the lack of comfort and amenities, the cost of the flight per passenger is relatively low. In other words, relatively little room is allocated per passenger in order to reduce the cost of the flight per passenger.
Business travelers, however, are often willing to pay an increased price to obtain more space and amenities. The increased space allocated per traveler allows the traveler to emerge from air travel relatively refreshed and potentially more productive on the ground. If some of the increased space is dedicated to productivity enhancing furnishings, then the increased space further increases the potential for air travel time to be useful time.
Travel by first class or business class addresses some of the productivity and comfort concerns with commercial air travel, but only in a marginal way. While the seats in traditional first and/or business class service are slightly larger, and the service is more personal, the effective result is little more than enhanced coach class travel.
One mechanism by which business (and other) travelers obtain enhanced comfort and productivity in flight is through full or fractional ownership of luxury-appointed aircraft. Full ownership of an aircraft provides the greatest flexibility to the owner, but at a great cost. In general, cost may be reduced by purchasing smaller aircraft, however, at the sacrifice of comfort and productivity concerns. Conversely, while a specially designed jumbo jet may be configured for optimal comfort and productivity, sole ownership of such a jumbo jet is typically not cost justified except in rare circumstances.
Fractional aircraft ownership helps spread the costs of aircraft ownership over several parties. In the existing practice of fractional aircraft ownership, multiple buyers (up to 16) each buy a fraction of an aircraft, collectively purchasing the aircraft. Each buyer then signs an agreement assigning the management of that aircraft to a management company who is also the originator of the fractional jet purchases either directly or indirectly through an affiliate. With conventional fractional ownership and operations, each owner, alone, or with their own employees and guests, may use the plane for up to a specific allotment of hours per year. The amount of annual hours of use are tied to the size of the fraction purchased.
In accordance with applicable governmental (“FAA”) regulations, multiple owners in existing fractional ownership programs cannot use and pay for the use of the aircraft on the same flight. As a result, the cost of use of the aircraft is the same to each owner, regardless of how many passengers the owner flies on the aircraft on any one flight. The consequence of this limitation is that the business model for fractional ownership is somewhat inefficient.